Fresno's ailing Met museum faces closure
Fresno city budget tied to fate of facility by a $15 million loan.
Posted at 12:00 AM on Tuesday, Dec. 15, 2009
By George Hostetter / The Fresno Bee


The long-troubled Fresno Metropolitan Museum is taking steps that could lead to its closure as soon as January.
"Absent a miracle, The Met will have to close in the very near future," said Fresno bankruptcy lawyer Riley Walter, who has represented the museum as a financial crisis consultant for months. "It will not be in December."

Stewart Randall, president of the museum's board of trustees, said he will make no guarantees that The Met will stay open for another month.

"It's going to be very tough to survive," Randall said.

The problem is the same one that has plagued the museum since its downtown building reopened in November 2008 after a three-year, $28 million renovation: too many expenses, not enough money.

Met officials said ticket revenue and attendance are meeting expectations, but donations and grants, the lifeblood of any nonprofit, privately supported museum, have slowed to a trickle. They declined to give details.

The significance of The Met's precarious future extends beyond museum employees and customers. Museum officials in 2007 persuaded the City Council to guarantee a $15 million bank loan to complete a renovation that was significantly over budget.

The Met defaulted, and the city this year paid off the loan while taking title to museum property. The two sides signed a deal designed to keep the museum in business and give the city some hope of recouping at least part of its investment.

The city, which borrowed about $16 million from its treasury to pay the loan and some other Met debts, expects to go to the bond market in February or March to secure long-term financing and repay the city treasury.

The city has its own serious financial troubles and must repay the city treasury for the Met borrowings by summer. A key part of its plan for handling its Met obligations is a federal tax-credit program that would generate nearly $4 million for the city to lighten the amount it must borrow on the bond market.

The program's catch is that the museum building must have a qualified tenant for at least seven years. Such a tenant generally is a nonprofit, public-benefit entity such as a museum.

If The Met closes and the city can't find a suitable replacement, City Hall would lose any chance at the nearly $4 million just as it's laying off employees to help close a $28 million general-fund deficit.

Should The Met collapse, City Manager Andy Souza said, there are plans to replace the museum with a mix of tenants that doesn't endanger participation in the tax-credit program.

"We're committed to a public-benefit use for that building," Souza said.

Souza declined to identify possible tenants.

The Met saga over the past four years has been full of twists and turns, and the museum's possible demise is no different.

Met officials said a limited liability company called Friends of The Met has been formed to raise money. Limited liability companies are generally in the money-making business, and museum officials emphasized that the museum did not create Friends of The Met. Randall declined to identify the investors in Friends of The Met.

But, Randall said, the mission of Friends of The Met clearly is to influence the museum's future. He said money raised by the company could fund operations and keep the museum afloat on the chance that fund-raising improves. Or, Randall said, Friends of The Met's money could be used to pay the expenses of closing The Met -- including final employee salaries and the cost of returning museum exhibits to their owners.

Walter described this use of Friends of The Met funds as "a soft landing" to the museum's stormy journey, one that would burn no bridges and generate no ill-will should the community someday try to revive a cultural institution on The Met's scale.

Should The Met close, Randall and Walter said, Friends of The Met would be repaid at least in part by the sale of the museum's assets, including its art collection.

Randall said the preference of Met officials is "to keep [the museum] going and operating." But in this economy, he said, the more likely use of Friends of The Met money is for the going-out-of-business scenario.

What's unclear is whether The Met's apparent financial connection to Friends of The Met, and the possibility that museum assets would be sold to repay company investors, are permitted by the city-museum deal without first getting city approval.

The deal prohibits the museum from incurring more debt without written city approval. The deal also states the museum, in some instances, is to give the city a security interest in Met-owned art, exhibits and collections.

Randall said he thought that these provisions, a point of contention during city-museum negotiations, had been deleted before the deal was signed.

City Attorney James Sanchez said he must investigate the matter, but thinks the provisions survived intact.

Sanchez said his office "will be tracking" the actions of Met officials.